White House
National Security Advisor, John Bolton, this afternoon will enact Title III and
Title IV of Helms Burton unleashing a flood of claims by Cuban Americans in the
South Florida Courts against Cuban and international companies who own or
“traffic” in assets in Cuba.

Whilst most
of these claims will have little chance of success, the risk of suits in the US
will be very damaging to the investment climate in Cuba not least because the
newly activated regulations will require US authorities to deny visas to
international travellers to the US who “traffic in assets” which are subject to
claims by US nationals in the US courts.

The
announcement is the latest in a series of progressively harsher steps taken by
the US against Cuba in the past months, citing as justification Cuba’s longstanding
alliance and support for Venezuela.

Until now,
Title III and Title IV of Helms Burton have always been suspended since their
enactment in 1996 after a WTO dispute was started by the European Union against
the extraterritorial nature of the legislation and its effect on EU companies.

With
President Trump threatening US$11bn of punitive tariffs on the EU as part of an
all-out trade war with the EU over EU subsidies for Airbus, the US Government
is clearly not concerned any more about keeping relations with the EU in good
order, and Cuba policy regrettably is one additional tool in the US negotiating
armoury.

What do Title III and Title IV aim to
do?

Title III is
part of the 1996 Helms Burton Act which is the main piece of US legislation in
place governing the US embargo on Cuba.

Most of the
Act has been actively enforced over the years and has been the subject of major
differences between US and EU and others because of its extraterritorial effect
on areas like banking which have seriously curtailed the ability of UK and EU
companies to carry out their legitimate transactions with Cuba.

Title III extends
the reach of Helms Burton to grant the right to Cuban Americans to make claims
in US courts over assets which were confiscated by the state following the
Cuban Revolution in 1959.

This means
that not only US citizens and corporations who were based in Cuba at that time
can claim but now all Cuban nationals who have subsequently become US Citizens
can claim. There an estimated 2 million
Cuban Americans in the United States.

The
terminology of who is potentially liable for a claim is ambiguously phrased as “trafficking
in confiscated assets”. This could be
widely interpreted and has not yet been tested by the US Courts.

If the US
courts accept jurisdiction for the claim and find in favour of the plaintiff,
then they would have authority to put a court order for the value of the assets
which could be then be seized in the US or other jurisdictions internationally
where they have the necessary agreements.

The effect
of these claims doesn’t just affect international companies – it also affects
Cuban state entities with any international presence – eg. exports of sugar,
rum and cigars or Cuba’s national airline- Cubana Airlines.

John Bolton
is also expected to announce the enforcement for the first time of Title IV of
the Act which would see the denial of US visas to those who “confiscate or
traffic in assets claimed by US nationals”.
This would be hugely detrimental to any international investors in Cuba
who found themselves subject to a potentially frivolous claim in the US courts
and must engender a very strong response from the EU, possibly of reciprocal
nature.

Why have Title III and IV not been
enforced before?

In the mid-1990s,
the application of Helms Burton threatened to derail US-EU talks for a trade
deal and the EU started consultations for a dispute panel at the WTO which it
was very likely to win.

The EU also
threatened that there would be reciprocal actions to any US court orders
against EU companies which would allow those EU companies to counter -sue in an
EU court against any asset held by the US claimant in the EU. EU, Mexico and Canada in any case have all
passed laws that would render in any case any US judgements under the Act
unenforceable.

A compromise
was reached in 1998 and a Memorandum of Understanding signed which effectively
committed the US president to suspend Title III by executive order on a 6
monthly rolling basis. In exchange the EU confirmed it would not continue to pursue
its claim at the WTO. This is the first
time that a US President has not followed through with the agreement – and
worse has done so in a unilateral way without any consultation.

What effect are Title III and Title
IV likely to have?

It is highly
likely there will be a flood of claims in South Florida, many of them
frivolous, from Cuban Americans – against foreign companies, but also against
Cuban entities. There will be little
cost in putting together a claim – and potentially a very high upside for claimants
if the claim was upheld.

Larger US
companies and holders of Cuban claims are unlikely to make claims against EU
companies because of the risk of their EU subsidiaries or assets could be sued
in the EU for compensation for any US claims upheld in the US courts. 50% of the largest claimants in US are reported
to have substantial assets in EU.

It is likely
that the volume of claims will seriously congest the South Florida Courts and
the Courts will need to take a view of how many of them to accept. They are likely to conclude that they do not
accept the basis or jurisdiction for many of them, but the remainder will take
years to be considered.

Whilst
existing EU, Mexican and Canadian businesses have substantial protection under
EU law against claims in the US Courts, the effect of any travel ban to the US
on individuals active in business in Cuba will be extremely damaging and must
result in a very strong EU response yet to be seen.

The more insidious
effect will be the fear factor which will be imposed on potential future
investors of being sued in the US Courts or losing their ability to travel to
the US. This will sadly rob Cuba of many
avenues of international investment which are very much needed to bring
prosperity and growth to its economy.

Even if
Title III and IV are suspended again relatively quickly – perhaps as a
negotiating giveaway in US-EU trade talks – these potential claims will still
be registered against the properties in Cuba effectively freezing them in place
and blocking future international investment.

Combined
with the ever-worsening economic and geopolitical situation relative to its
long-standing ally Venezuela, Cuba finds itself caught in the middle of two
separate global geopolitical power-plays.

Chris Bennett is Managing Director of
The Caribbean Council and The Cuba Initiative

Company Information: The Caribbean Council is a company limited by guarantee that is registered in England and Wales under registration number 4276621. It is registered for VAT in the UK under number 998253657. Its registered address is Temple Chambers, 3-7 Temple Avenue, London EC4Y 0HP.